LB Group(002601) 华鑫证券·2024-09-09 03:17Investment Rating - Buy (Maintained) [6] Core Views - The company is a global leader in the titanium dioxide industry, with significant integrated advantages and the ability to navigate industry cycles [2] - The company has the lowest production costs in the industry, creating a strong competitive moat [3] - The company has a high dividend payout policy, with an average dividend payout ratio of 72% over the past seven years [4] - The titanium dioxide industry is at the bottom of its cycle, with the company well-positioned to benefit from future growth due to its cost advantages and capacity expansion [5] - The company is expected to achieve net profits of 3.8, 4.5, and 5.3 billion yuan in 2024, 2025, and 2026, respectively, with EPS of 1.59, 1.90, and 2.22 yuan [9] Company Overview - The company is the world's largest titanium dioxide producer, with an annual capacity of 1.51 million tons, and also the largest sponge titanium producer with an annual capacity of 80,000 tons [2] - The company has a fully integrated titanium industry chain, from titanium ore to titanium dioxide and titanium metal/derivatives, which provides significant cost advantages [2] - The company's titanium dioxide production cost in 2023 was 10,538 yuan/ton, significantly lower than its peers, ensuring profitability even during industry downturns [3] - The company plans to expand its titanium concentrate capacity to 2.5 million tons by 2025, further reducing production costs [3] Financial Performance - The company has maintained a high dividend payout ratio, with a total dividend payout of over 14.8 billion yuan in the past seven years [4] - In 2023, the company's dividend yield was 5.25%, well above the industry average [4] - The company's revenue grew from 2.06 billion yuan in 2014 to 26.79 billion yuan in 2023, with a CAGR of 33% [21] - Net profit grew from 63 million yuan in 2014 to 3.23 billion yuan in 2023, with a CAGR of 55% [21] - In H1 2024, the company achieved revenue of 13.8 billion yuan, up 4.09% YoY, and net profit of 1.72 billion yuan, up 36.4% YoY [21] Industry Overview - The global titanium dioxide industry is highly concentrated, with the top six producers accounting for 52% of global capacity [31] - China is the largest producer of titanium dioxide, with a capacity of 5 million tons in 2022, accounting for 53% of global capacity [34] - Overseas titanium dioxide capacity is declining due to environmental pressures and high labor costs, with several major producers closing plants in recent years [35] - Domestic titanium dioxide capacity in China is expected to increase by 700,000 tons in 2024 and 840,000 tons in 2025, but future growth is limited due to environmental regulations [37] Demand and Supply Dynamics - The titanium dioxide industry is at the bottom of its cycle, with most companies operating at a loss [5] - The company's cost advantages allow it to remain profitable even during industry downturns [5] - The company has 250,000 tons of unutilized titanium dioxide capacity, which will contribute to future growth [5] - Domestic demand for titanium dioxide is expected to improve, driven by recovery in downstream industries such as plastics, paper, and coatings [40] - Export demand is also expected to grow, particularly in emerging markets such as India, Brazil, and Turkey [45] Cost Advantages - The company has the lowest production costs in the industry, with a fully integrated supply chain from titanium ore to titanium dioxide [3] - The company's titanium concentrate capacity is expected to double by 2025, further reducing production costs [3] - The company's vertical integration and scale advantages allow it to maintain a significant cost advantage over its peers [3] Future Outlook - The company is expected to achieve net profits of 3.8, 4.5, and 5.3 billion yuan in 2024, 2025, and 2026, respectively, with EPS of 1.59, 1.90, and 2.22 yuan [9] - The company's PE ratios for 2024-2026 are 10.1x, 8.5x, and 7.3x, respectively, indicating significant upside potential [9] - The company's strong cost advantages and capacity expansion plans position it well for future growth [5][9] Risks - Economic downturn risks [10] - Significant fluctuations in product prices [10] - Delays in project construction [10] - Environmental policy restrictions [10] - Lower-than-expected progress in equity incentives [10]